Settlement
Settlement happens at 12:00 UTC every day. This is when Trade8 nets all the profits and losses that occurred over the past 24 hours, and moves them to your available balance. A liquidity pool (insurance fund) is available to cover excess losses.
If profits minus losses < 0.5% of the liquidity pool, the liquidity pool covers the profit of winning traders.
If profits minus losses > 0.5% of the liquidity pool, a Socialized Profit Adjustment (SPA) occurs for winning traders.
Example: losses exceed profits
Total profits across all winning traders: 450 BTC
Total losses across all losing traders: 500 BTC
Liquidity pool: 1,000 BTC
Since losses exceed profits, winning traders are paid for by losing traders. Regular settlement occurs.
Settlement does not affect your open positions or orders. You can keep them open for as long as you want.
Example: profits exceed losses, but under the 0.5% liquidity pool threshold
Total profits across all winning traders: 202 BTC
Total losses across all losing traders: 200 BTC
Liquidity pool: 1,000 BTC. 0.5% of liquidity pool = 5 BTC.
Profits exceed losses, but winning traders can be paid using the liquidity pool (202 - 200 = 2 BTC, which is below the 0.5% liquidity pool threshold). Regular settlement occurs.
Example: profits exceed losses + 0.5% liquidity pool threshold
Total profits across all winning traders: 510 BTC
Total losses across all losing traders: 500 BTC
Liquidity pool: 1,000 BTC. 0.5% of liquidity pool = 5 BTC.
Profits exceed losses and cannot be fully covered with the 0.5% threshold of the liquidity pool. Socialized Profit Adjustment (SPA) occurs on the excess profit of 5 BTC (510 - 500 - 5).
Socialized Profit Adjustment (SPA) is occurs when winning trader profits for the day exceed all the losing trader losses for the day plus 0.5% of the liquidity pool.
SPA can occur on closed positions through a new negative P/L position or on open positions through a decay rate adjustment.
The process is in place to protect the platform from high risk scenarios, such as a single trader consuming the liquidity pool (which would put all traders at risk).
SPA exists in one form or another on all perpetual contracts platforms. It's not unique to Trade8.
SPA is applied automatically without intervention from Trade8.
SPA can never result in a loss. It's simply an adjustment of profit. SPA is applied based on your day's profit relative to the total day's profit across all winning traders.
Example
Total profits across all winning traders: 510 BTC
Total losses across all losing traders: 500 BTC
Liquidity pool: 1,000 BTC. 0.5% of liquidity pool = 5 BTC.
The excess profit in this case is 5 BTC (510 – 500 – 5). SPA re-adjusts winning trader profits to offset the excess 5 BTC.
If SPA occurs, and you have a positive P/L for the day (you're a winning trader), your personal profit adjustment is equal to
For example, if you made a 0.5 BTC profit that day, your profit adjustment would be equal to -0.0049 BTC (meaning your day's profit is reduced by 0.0049 BTC) resulting in a net day's profit of 0.4951 BTC.
No profit adjustment occurs to traders who end the day's session with a negative P/L.
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